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A record high for solar M&A

Solar M&A activity hits a record high in an indication of the stressed environment, while China drags South Korea into its solar trade war with US as it seeks to aid its solar companies.

China, smarting from imposition of anti-dumping duties of as much as 250 per cent on solar panel imports by US two months ago, has adopted a two-pronged strategy to provide relief to its industries along the solar value chain.

While increasing domestic demand on one hand, it formally started last week its own probes into dumping and illegal subsidies, drawing South Korea into the vortex of what was originally a China-US dispute.

China's Ministry of Commerce said it is investigating whether exporters from the US - and South Korea - dumped solar-grade polysilicon in China. The investigation was triggered by complaints from four domestic companies, including GCL-Poly Energy Holdings and LDK Solar.

China also launched an investigation into the support provided by the US government to its exporters, to see if there is a case for the imposition of countervailing duties. China will examine a tax-exemption programme for the “advanced-energy manufacturing industry” promoted by the US federal government, and 15 state government-sponsored programmes in Michigan, Tennessee, Washington and Idaho, according to the ministry.

Meanwhile, to boost demand for its panels domestically, China has quadrupled its solar power target for 2015, to 21GW. There are indications that this may be bumped up further. The target for 2020 is 50GW.

There also seems to be a third leg to China's strategy to support its solar companies: direct public sector support. The loss-making LDK Solar will have a part of its outstanding debt paid by the government of the city of Xinyu, where it is based, it was revealed last week.

Mergers and acquisitions in the solar industry globally saw a record jump, in an indication of the stressed environment resulting from cutbacks in incentives, and overcapacity. Investors bought a record 3.9GW of solar PV projects in 2011, up 122 per cent on the previous year, according to Bloomberg New Energy Finance research. Average sale value declined to €3.6m per MW, compared to a peak of €6.4m in 2008.

Protectionist measures were also at the centre of debate in another part of the world - Brazil. The South American country's national development bank, BNDES, rendered five large wind-turbine makers ineligible for its funding since they did not meet local-content requirements. Vestas Wind Systems, Suzlon Energy, Siemens and Acciona were among those locked out of funding in the $US3.5bn market, Bloomberg News reported. The action resulted from an unannounced audit conducted by BNDES, of companies in Brazil providing turbines to developers that use government loans.

In Europe, there were indications that Germany was reviewing its schedule for going nuclear-free by 2022. The UK announced new incentive rates for small-scale renewables, to be implemented from 1 December 2012. These include wind plants, combined-heat-and-power plants and biomass plants. Feed-in tariffs for small-scale solar were announced in May and take effect on 1 August 2012. A degression mechanism for wind, hydro and biomass plants would be introduced in April 2014 that will automatically trigger rate cuts when deployment of the technologies reaches certain thresholds. The support to be provided for large-scale renewable energy plants is still being debated.

At the other end of the world, the European Bank for Reconstruction and Development and the Netherlands Development Finance Company agreed on a $US85m loan for Mongolia's first wind farm. Turbines for the 50MW Salkhit wind farm are to be supplied by General Electric.

In North America, the prolonged heat wave and failing crops brought the issue of climate change centre stage. A record 70 per cent of respondents to nationwide polls by the University of Texas over 12-16 July said they thought the climate was changing.

Meanwhile, there was another clean energy rationalisation in the US last week when Amonix - a closely held maker of solar panels that qualified for $21.5 million in federal subsidies - closed its 214,000-square-foot plant in Nevada. The company said the decision to close the plant was based on "challenging" pricing for solar panels and low demand for its concentrated photovoltaic systems.

EU carbon price drop

European carbon allowances, or EUAs, for December 2012 delivery fell last week on fears that a plan to curb their oversupply will require a longer-than-expected approval process.

EUAs tumbled 6.7 per cent, closing at €7.14/t, compared with €7.65/t at the end of the previous week. December EUAs were trading as high as €7.83/t on Tuesday, closing that day’s session at €7.68/t.

They opened €0.13/t lower on Wednesday and fell a further €0.75/t in the first few minutes of trading. The price fall was sparked by a leaked document about a European Commission proposal to delay sales of allowances from 2013.

This suggested the proposal would depend on a lengthy change to the EU Emissions Trading System Directive, rather than the faster changes to the Auctioning Regulation that had previously been expected.

If changes are required to the directive as well as the regulation, Bloomberg New Energy Finance expects the plan’s adoption could be delayed to the second half of 2013.

United Nations Certified Emission Reduction credits, or CERs, for December 2012 dropped 2.5 per cent last week to close at €3.17/t, compared with €3.25/t the week before.

Bloomberg New Energy Finance

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